Published: Sunday, December 10, 2006, Everett Herald

By Tom KellyHerald columnist

The peaks and valleys of the 2006 housing market were curious - perhaps even unique - but consumers and real estate professionals will probably experience a more consistent, positive environment in 2007, according to leading industry analysts.

National economists and pollsters, even the legendary Alan Greenspan, who retired as chairman of the Federal Reserve earlier this year, also concurred that housing activity should pick up some steam heading toward the end of the year and into 2007.

"Most of the negatives in housing are probably behind us," Greenspan said. "The fourth quarter should be reasonably good, certainly better than the third period."

Others, including Steve Murray, publisher of Real Trends, a real estate research and information company, were willing to push a positive outlook further into the future. Murray feels the desire for a home as a residence or as a recreation or retirement investment will remain strong for the next decade.

"We believe that housing consumers will purchase more homes in the next 10 years than they did in the last 10 years," Murray said. "And, we believe that real estate professionals will earn more in the next 10 years than they did in the last 10 years."

The key question, Murray said, is who will earn it?

"Consumers do not, and will not, rely on sales professionals solely for their housing information," Murray said. "Consumers will increasingly rely on the Internet for their information. Sales professionals who deliver information to consumers via the Web and then provide rapid response to consumer requirements will win the day."

David Lereah, chief economist for the National Association of Realtors, said 2006 was a different market because past declines were associated with the traditional factors of employment losses and rapidly increasing interest rates. The 2006 slump occurred while jobs were being created, sound economic fundamentals were in place and mortgage interest rates were at near historic lows.

"The 2006 declines came from affordability problems because prices were too high, forcing consumers to borrow too much," Lereah said. "We also experienced investors leaving the market, the perception that real estate was no longer a favorable investment, and the scare provided by some members of the media that a national bubble was bursting."

NAR predicts that existing-home sales are expected to coast at roughly the same level next year.

"Overall home price gains will be modest," Lereah said of 2007's national outlook. "Home sellers are becoming realistic about current market conditions and are now offering more competitive pricing, in addition to some incentives or concessions, especially to help first-time buyers."
The Realtors group expects that even with temporary declines in some months, the national median existing-home price should increase 1.9 percent to $223,700 by the end of the year then rise another 1.7 percent next year to $227,500.†The median new-home price is expected to drop 1.1 percent to $238,400 this year before rising 1.3 percent in 2007 to $241,400.
"We now have the most favorable market for home buyers in several years, and most sellers, who've been in their home for a normal period of homeownership, are still seeing very healthy returns on their investment," Lereah said.†

Conditions for buyers have improved because sellers are flexible now and mortgage interest rates are near historic lows. The market promises to be more balanced between buyers and sellers by early spring, supporting future price growth, he said.

Existing-home sales, expected to fall 8.6 percent to 6.47 million this year (the third-best performance on record) are projected to be essentially even in 2007 with a 0.6 percent decline to 6.43 million.†New-home sales, likely to drop 16.8 percent to 1.07 million in 2006, are forecast to fall another 8.7 percent next year to 975,000, largely because of a significant reduction in construction by builders.

How can the housing industry get better? Murray believes that sales agents can improve their efforts in serving sellers.

"We (agents) are not listening first and talking second," Murray said. "Sellers are far less satisfied than buyers. We have to remember that sellers are giving something up, and often that something is great memories. We need to ask them what matters to them as a seller and then shut up and listen to what they really need."

Tom Kelly's new book "Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border" was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com.